What do you see as the overall challenges for expanding the deepwater market in Asia Pacific, and how do you see industry dealing with them?

Deepwater is growing in the Asia Pacific. Especially in Malaysia, there are developments like Kikeh and Gumusut. The challenge in this expanding market is technical capability. We need to train our people in technical capabilities, and we need to identify external sources of technical capability. Once we have those two things in place, we can start looking at medium water depths. We might want to go to places like Malikai, where it is only 500 meters, and then steadily go out to 1,000 meters and so on, until we are fully capable of drilling deeper waters.

The other item is that, to go into deepwater, you need to have deepwater drilling rigs, which are very expensive in terms of the CAPEX. To make it economical, you need a continuous market to ensure that the idle time between contracts is very minimal. In South America you can have continuous contracts of three to five years, but in Malaysia the number of deepwater fields are not that extensive, so it’s difficult to get continuous work. Even if you look at the countries around Malaysia – like Thailand, Vietnam, Indonesia, Philippines and so on – it’s similar. I think they have even fewer deepwater fields compared with Malaysia.

Can you provide insight into the volume of development projects in Southeast Asia?

In 2008, the price of oil spiked through the roof, and that had a ripple effect all over the world, especially in countries that either did not produce oil or did not produce sufficient oil. Subsequent to that, the national oil companies have started to aggressively develop their own fields. Before, the development was focused on the IRR, or the rate of return on the field, but now we are seeing that fields are being developed even with a smaller return.

On top of that, there are aggressive activities for developing countries in the Asia Pacific to rely more on oil revenues. They are starting to produce more oil to support their economy and the development of the nation. In Southeast Asia, development projects have been done mostly by the traditional players – Malaysia, Indonesia and Thailand – but the Philippines and Myanmar are also starting to focus on development projects.

You see governments also focusing on oil development. In Malaysia, for example, not only is PETRONAS pushing for it, but the Malaysian government is, as well. They are not only developing their fields but also extending fields with enhanced oil recovery.

What does that mean for drilling contractors in terms of contracts?

With the volume of development, oil companies now have more visibility on the number of wells they can drill and, therefore, visibility on the length of the contracts they will award. This is more prevalent in the big companies and national oil companies. However, with this new development, there is also more opportunity for the independents and small players to come into play. These independents normally don’t have multiple fields, so whenever they come in with one or two fields, they will charter only for short terms of six months or even shorter. That’s the combination – the bigger players that will charter for a longer period and the smaller companies that charter for shorter contracts.

PETRONAS awards “risk service contracts,” which is an alternative to production-sharing contracts with a different payment agreement, as part of their effort to maximize production for domestic marginal fields. These risk service contracts, as well as smaller developments in Thailand, are mostly drilled using jackups, which leads to a tight market in this region. It doesn’t help that a lot of jackups have moved out of the region because of the more lucrative market in Mexico and the North Sea right now, so you have a double whammy.

The UMW NAGA 4 is operating for PETRONAS offshore Malaysia. Asia Pacific continues to see a tight jackup market, competing for units not only within the region but also with international markets such as Mexico.

What are the critical issues in terms of technical difficulty on local workover wells?

Typically the workover wells are existing production wells on existing platforms, which could be 10 to 20 years old. Along the way, the strength of the completion strings has deteriorated, as has the downhole completion equipment. As such, it is a challenge to select proper cutting or milling tools. An even bigger challenge is killing the well through bullheading or lubricating. We have to ensure correct mudweight to avoid overbalance or underbalance, which could cause lost returns or influxes.

Southeast Asia has many different countries that operate in many different ways. Are regulations in terms of equipment and manpower becoming more uniform amid the rapid pace of growth in the drilling sector?

Some countries are easier to handle than others. However, if you understand the issues, it can all be managed. Many oil companies are embracing international standards and looking for best practices, so in those terms there is increasing uniformity. In terms of government regulations, import/export, the financial regime, taxation and so on, we still see a lack of uniformity. The governments are moving in that direction, but because of certain requirements in certain countries, they are perhaps not moving as fast as they could.

What are the critical issues in terms of safety on drilling rigs in the region?

External factors can be things like cyclones, which are not an issue in Malaysia but can be in Vietnam. During the November 2013 cyclone, while we did not shut down, everybody on our NAGA 2 rig was on standby to evacuate. The lesser effect of the cyclone is an increased risk in safety with boat transfers. During monsoon season, we definitely exercise more vigilance.

In terms of day-to-day operational factors, while we have quite advanced HSE management systems, bringing new people to fully comply with the system is a challenge. The oil and gas industry already embraces a very high level of safety culture compared with other industries, but we need to install a culture where employees are not complying simply because the company asked them to. They should comply because they think, “I need to be safe. I need to make sure that me and the guy next to me go back to our families safely.” Formal training can bring you to a certain level, but from a culture standpoint, informal training is more important.

I actually go to the rig myself to convey our safety message so it comes all the way from the top. I believe that when you see top management talk about safety, the response you see is different.

Oil companies are focusing on hand and finger injuries, proper PPE use and dropped objects. Dropped objects is becoming more prevalent, and some of the near-misses can be high-potential cases, which means that serious injury can happen if it hits the people below.

UMW’s hydraulic workover unit GAIT 3, which had been operating in Vietnamese waters, is currently at the Kemaman Service Base undergoing maintenance. Workover wells in Asia Pacific are typically on platforms that could be 10 to 20 years old, where completion strings and other downhole completion equipment have deteriorated. A key challenge is to ensure the correct mudweight while killing the well through bullheading or lubricating.

In June 2012, you signed an MOU with PETRONAS Technical Training to develop Malaysia’s first certified drilling academy of its kind, with the aim of addressing the shortage of drillers and skilled drilling personnel in the local oil and gas industry. The Drilling Academy opened in March 2013 in Terengganu, Malaysia. What are the challenges the Malaysian oil and gas industry is facing in terms of personnel, and are they different than elsewhere in the world?

I think the issues we are facing here are the same as all over the world. We are all seriously in shortage of personnel, not only skilled technical personnel but also experienced management. Even in Malaysia, while we are doing our best to train Malaysians, still there is a shortage of Malaysians in the industry. We still have to hire a lot of expatriates, in the higher levels and lower levels. Since Macondo, there has been a lot of emphasis on safety and competence in the oil and gas industry; you need people to have the right certificates on paper, as well. With these three items short, what we are trying to do is cover at least two of them.

When you go to the Drilling Academy, you will be trained in accordance with the syllabus and the requirements of the industry. Not only do you get the skills, but you also get the paperwork. To give some hands-on experience, we are also putting some trainees onboard the drilling rig to give them a feeling of what they learn in the classroom. We also have a cyber-based drilling simulator to provide them with a more advanced real-life drilling experience.

In Malaysia, there are two types of training. Theoretical training centers like Shell’s Well Integrity Hub, as well as Universiti Teknologi Petronas, are where they teach the knowledge and understanding of subject matters. For UMW Drilling Academy, we are training people who work on the rigs with their hands. These are the blue-collar workers, starting from floorman to the driller.

With specialized drilling training in this area on the increase, what do you see as the role of international bodies like IADC in overseeing local initiatives?

I think it’s important for IADC to coordinate the standardization of the training programs. It would be good if the accreditation also involved standardization to ensure that best practices in other parts of the world are being implemented in places where they are not being practiced to ensure that it is a uniform requirement.

The KSAs is a good initiative. We are still seeing certain different standards from different companies, and more uniformity would be great.

I think IADC also should play a bigger role in developing the training program itself because it is exposed to the latest developments in industry from a technological and operational standpoint. These can be integrated into the curriculum so graduates we produce will be fully equipped with the latest knowledge, technology and developments.